The action of the CRB Spot Raw Industrials index and long dated US Treasuries suggest that this is a fantastic buying opportunity for crude oil, gold and silver and the broad commodity group in general! Yes we are well aware of the recent weakness in crude and precious metals but we think this weakness is merely the market’s way of trying to shake weak hands out of the market both on the long side in commodities and short side in the USD. There is little evidence to suggest that any fundamental change has occurred with respect to commodities. In fact if you take out the impact of precious metals, and crude, commodity prices (agriculturals, softs, & metals) are only a few pips away from multi-week highs. Only when there is evidence of a broad based breakdown in commodities (using the old CRB as a proxy for the broad market) will we conclude that commodities are in trouble. This broad based breakdown is more likely months away as opposed to days. Note how strong the CRB CCI Index remains. We think the issue right now is not whether or not to be bullish or bearish, rather how aggressive one should be on the long side.

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